Productivity under the surface

Why invest in mining equities? One commonly held view – that, for example, a share in a copper miner is a bet on rising copper prices – is not backed by historical evidence. In fact, while commodity prices are mean-reverting, they are neither stable, easily predictable on a short-term horizon, or consistently inflationary. That’s despite being steered by two powerful inflationary forces: demand growth, and steady depletion of geological resources. In other words, while growing populations and economies are consuming ever greater quantities of metals, discoveries have slowed, and metal grades have thinned. And yet there's no guarantee prices will climb.